W15515RAJU OMLET: EXPANDING IN THE UNITED ARAB EMIRATESKirti Khanzode and Sandeep Puri wrote this case solely to provide material for class discussion. The authors do not intend toillustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and otheridentifying information to protect confidentiality.This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without thepermission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rightsorganization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, WesternUniversity, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) [email protected]; www.iveycases.com.Copyright © 2015, Richard Ivey School of Business Foundation Version: 2015-11-12In January 2015, as Rajiv Meherish, a businessman in Dubai, rode the elevator to his office on the 26thfloor of a high-rise building, a young woman who stood next to him exclaimed, “Are you the guy fromRaju Omlet?” Until then, Rajiv was busy checking his phone, oblivious to others in the elevator, but thesudden attention made him self-conscious. He looked at the woman, smiled and said, “Yes!” As thewoman stepped off, she said, “Good job. I love the place!” The compliment left Rajiv flustered for a fewmoments. He walked towards his office with renewed vigour; the incident in the elevator had made himfeel happy and aspirational at the same time.Within a short span, Rajiv’s restaurant, Raju Omlet, had become so famous that people startedrecognizing him because of it. The lady in the elevator recognized him, as would have any frequentvisitor to the restaurant. Rajiv spent a considerable amount of time at the eatery to ensure that hiscustomers’ needs were met and that everything flowed smoothly. He realized his presence at therestaurant during the initial days was as important for him as for his customers and staff.Rajiv and his son Nakul managed the venture jointly. They were very happy with the way the businesshad shaped up in the last two years and were proud of the AED2.04 million1 turnover for the year 2014(see Exhibit 1). Raju Omlet specialized in egg preparations, which was their unique selling proposition(USP), and the entire marketing campaign was developed around this offering. Expansion was inevitable,but Rajiv struggled with mapping out a plan for doing so. A brainstorming session of key decision-makersat Raju Omlet sought the answers to two difficult questions: Would it be possible to sustain the expansionwith a single product offering? Would diversifying the product range kill the restaurant’s uniquecompetitive advantage?RAJU OMLETThe IdeaRajiv and Nakul launched Raju Omlet in June 2013 at Al Karama, a residential area in an older part ofDubai. The 18-chair eatery became immensely popular within the short span of a year, with 2001 AED = Emirati Dirham; US$1 = AED3.67.For the exclusive use of T. ALMASAEID, 2021.This document is authorized for use only by TURKI ALMASAEID in 2021.Page 2 9B15A052customers visiting on a daily basis. In the next year, this number grew to about 250 customers daily and300 on weekends.Rajiv’s entrepreneurial instincts picked up on the unique concept of Raju Omlet during a business trip toVadodara, India. Rajiv recollected the day he was led to a roadside handcart eatery by his taxi driver afterrequesting to be taken somewhere for a snack. The driver drove him to Raju Omlet Centre, quite unlikeany place Rajiv would have frequented. The driver’s endorsement of owner and chef Rajesh BhogilalRana (Rajubhai)’s omelettes and the customer rush at the stall prompted Rajiv to explore the roadsideeatery. Rajiv, a vegetarian who had shunned eggs for a couple of decades, had ordered only a cup of tea,but was persuaded by Rajubhai to try the popular Raju’s omelette. Rajiv liked what he tasted, and thatexperience inspired the idea of replicating the concept in Dubai.The GenesisNakul, enterprising like his father, was equally excited about the idea but realized that the handcart setupwould have to be scaled up to match the magnificence of the city of Dubai. The misspelled name “RajuOmlet” was retained with the consent of Rajubhai (see Exhibit 2). The ambience of a humble roadsideeatery was, however, preserved through the furniture and the cutlery. The interior was decorated in a wayto invoke a feeling of déjà vu in anyone who had eaten at a roadside stall in India. The posters, withinformative content about eggs, made the interior of the restaurant look trendy (see Exhibit 3). Theoutcome was a wonderful fusion for expatriate2 Indians who were reminded of the humbler settings oftheir home country yet found the place stylish.SUCCESS MANTRAThe “Eggs Laid Yesterday Made Today” ModelRajiv was a businessman with a philanthropic inclination. Philanthropy for him, however, did not justmean donating money to charity. Philanthropy to Rajiv also included being fair in business and deliveringvalue to his customers. As passionate as he was about his business, he also treated it as a means to servesociety. He primarily sought to deliver value through impeccable food quality and service. Rajiv said,“We offer fresh eggs cooked with high-quality cooking ingredients and provide value for money.”Rajiv admitted that when he was new to the egg business, he could not differentiate between eggs laid theprevious day and those laid a month ago. But by constantly searching for the highest quality products forhis customers, it took him little time to figure out a taste-defining difference. While seeking suppliers forhis business, he came across a local poultry farm called Al Jazzera Poultry. It was this supplier, in anattempt to make his sales pitch to Rajiv, who elaborated upon the difference between fresh eggs and olderones. In Rajiv’s words, he learned that “the difference was as much as buying fresh fruits and vegetablesover the frozen ones.”Rajiv realized the effect that freshness would have on the preparation and the taste of the egg dishes. Hestarted sourcing fresh eggs and entered into an agreement with the poultry farm. Even though he had to2 Expatriate is used, as opposed to immigrant, because the United Arab Emirates does not give permanent residency toimmigrants. People from other countries who wish to live and work in Dubai are typically given a residence visa of up tothree years, which is renewable. The applicant needs a local person or entity to sponsor the visa. In the case ofemployment, the employer sponsors the visa. Source: Mohammed K. al-Safi, “Dubai Visa, Residency and SponsorshipQuestions and Answers,” http://dubaiemploymenttips.com/ visa/comment-page-1/, accessed January 2, 2015.For the exclusive use of T. ALMASAEID, 2021.This document is authorized for use only by TURKI ALMASAEID in 2021.Page 3 9B15A052pay 30 per cent more than he would at other suppliers, he persisted because this offering fell in line withhis core belief of serving high-quality fresh food at reasonable rates. At Raju Omlet, the average cost for ameal for two was AED45 (see Exhibit 4). Rajiv said, “This is one of the many ways in which I stay trueto my business in delivering high quality with value for money to my customers.”The Local LocationThe choice of location was one of the key factors that contributed to the success of the restaurant. AlKarama was preferred over other areas in Dubai for two reasons: the presence of the Indian diaspora andthe presence of other eating outlets offering Indian cuisine, which made the vicinity feel familiar to theexpatriate Indians. Al Karama, a residential area in the older part of Dubai, was among the mostpopulated areas in the city. Over the years, Al Karama had earned the reputation of being an “Indianeating lane” due to the large concentration of Indian expatriates living in the area.The Expatriate ConsumersRajiv and Nakul were clear about their potential customer community from the beginning. Omelettes hada universal appeal, but Rajiv and Nakul preferred to target Indians and Pakistanis because of the similarityin their eating habits. Radio was chosen as the medium of advertisement to target working professionalscommuting to work. Dubai was home to many expatriates from India and Pakistan who lived withouttheir families and hence ate out almost daily. This meant that the Raju Omlet clientele was predominatelymales who were left with little time to cook because of the fast-paced city life. Women came with theirfamilies, as did young people and college students.The Fresh StartLike any new business, Raju Omlet had its own set of start-up troubles. Rajiv wanted a gas cylinderconnection, whereas the Dubai municipal authorities insisted that he opt for a pipeline connection. Rajivknew that gas cylinders could be purchased at a fixed price, which could increase periodically, but hefeared the notorious frequent rise in prices of pipeline connections. Yet, he eventually relented. Therestaurant was set up with a pipeline connection.Some Indian businessmen had certain religious beliefs, such as inaugurating the cash box on an auspiciousday. Thus, Rajiv waited for an appropriate day. However, customers started to come into the newrestaurant, and he did not want to ask them to leave without eating. Rajiv ensured that every customer whocame into the restaurant was served; however, they could not be charged because the cashbox was yet to beinaugurated. The customers found this idea fascinating because they realized that they could eat as much asthey wanted without having to pay. Word soon spread and the traffic to the restaurant increased whendoubtful customers came in to see whether it was true. All of them were pleasantly surprised when theywere served free food. When some customers insisted on paying, Rajiv asked them to give AED1 as atoken. Although the practice continued for 10 days, it did help to create positive word-of-mouth publicityfor the new restaurant.The StaffThe staff was composed of eight employees, including two chefs with great service experience who weretrained to provide customized dishes. Most of these employees were brought in from India. Rajiv andFor the exclusive use of T. ALMASAEID, 2021.This document is authorized for use only by TURKI ALMASAEID in 2021.Page 4 9B15A052Nakul provided the required training to the employees. They focused on training their employees on softskills to offer superior customer service. The employees were asked to remember the names of regularcustomers. They were also empowered to provide the best service possible, even if it required goingabove and beyond the required service. They were told to change the dish immediately following thesmallest of customer complaints. The employees were also trained on hard skills, such as learning how touse the cash register and how to serve food.The staff was provided with competitive salaries, accommodation and food. The restaurant was closed onMondays as the owners wanted to ensure that all employees got a holiday, and therefore did not go for the“off in rotation” model. The employees were also given incentives, such as movie tickets and giftcoupons.THE MARKETING STRATEGYThough the word-of-mouth publicity did the new venture a great deal of good, Rajiv and Nakul knew thatthis alone would not suffice. Rajiv selected radio as the medium of advertising, but the content of thisinitiative was not outsourced. Both father and the son wanted distinctive advertisements that could stand out.Nakul spent considerable time researching the health benefits of eggs. He wanted the radio spots to be wovenaround these benefits. He also wanted to dispel certain common myths about egg consumption through theseadvertisements. The strategy was clear: to talk about Raju Omlet implicitly by focusing on the health benefitsof eating eggs. These spots always ended with the message, “This was brought to you by Raju Omlet,”followed by details of the location and timings. The radio spots also conveyed that eggs could be ordered forbreakfast, lunch and dinner, lest people perceive Raju Omelet as a place for snacks and not meals.Two things worked for Raju Omlet: 1) the clarity of the potential customer base, which made theiradvertising efforts focused, enabled them to select the right radio channels; and 2) the advertisementsthemselves, as the content did not talk about the restaurant but rather the health benefits of eating eggs. Incommunications parlance, the ads used indirect messaging to establish persuasive appeal.The campaigns were carried out on two channels, one after the other. The frequency of the radio spotswas considered “prime time” — weekday mornings from 7 a.m. to 10 a.m., as well as from 4 p.m. to 7p.m., when office workers were in transit. Because of these time slots, the ads were noticed from the firstday they aired. The radio spots were different from other restaurant ads in the sense that they educatedpeople on the health benefits of eating eggs and also dispelled myths, all of which intrigued peopleenough to visit Raju Omlet. The radio ads pulled people into the eatery; high-quality food, good serviceand a cozy and ethnic ambience did the rest to ensure repeat and happy customers.The Sunny Side AppIn the era of smartphones, mobile apps had become critical to the success of the companies in the servicesector. Raju Omlet, too, introduced a free mobile app. All of the radio spots mentioned the app and askedcustomers to download it for more information. The posters inside the restaurant also containedinformation about the app (see Exhibit 5). The homepage of the app looked vibrant, with a bright yellowand red colour scheme and tabs such as Fan Wall, Menu, Reach Us, Photos, Reviews, Contact Us,Mailing List and About Raju Omlet.For the exclusive use of T. ALMASAEID, 2021.This document is authorized for use only by TURKI ALMASAEID in 2021.Page 5 9B15A052The “No Home-delivery” OptionRajiv and Nakul were reluctant to offer home delivery as they foresaw a drop in the quality and taste ofthe packed food meant for later consumption. Rajiv did not want consumers to eat and pay the same pricefor diminished-quality food. Also, he wanted his consumers to enjoy the food primarily at his restaurantbecause it was in the brand-building phase. Although he realized that the home-delivery option was amajor source of additional revenue for restaurants in Dubai, he decided to take that hit in the largerinterest of the brand-building exercise.Radio Advertising in the United Arab EmiratesIt was economical to buy cars in the United Arab Emirates (UAE) because of they were tax-free. Vehicleloans were available at very low rates of interest, and fuel prices were also low. Public transport was stillnot as well developed as in the Western world. Together, these conditions induced people to buy cars forcommuting. People spent two to three hours daily on average in their automobiles while commuting towork, which made radio advertising a good promotion platform in the UAE.THE MARKET: UNITED ARAB EMIRATESOver the past decades, Dubai, called the “Melting Pot of Cultures” and home to people of over 200nationalities living together in peace,3 had become a sought-after live-and-work destination for peopleacross the world. Several factors contributed towards making the UAE a lucrative expatriate destination.The country had excellent infrastructure, matched by only a few countries in the world. It was alsoregarded as one of the safest places to live. Being a tax-free country added to the attraction. Tolerance,security, job opportunities, attractive environment for investment, advanced infrastructure and tax-freeincome were the main alluring factors.4The UAE, considered a gateway to the West, had become a trade and business hub. The presence ofalmost all the world-class companies had added to the influx of expatriates. UAE comprised the sevenemirates of Abu Dhabi, Dubai, Sharjah, Ajman, Umm Al Quaiwain, Ras Al Kahimah and Fujairhah.These were very well connected through roads, and people residing in one emirate travelled to otheremirates for work. Of the total population of UAE, more than 80 per cent were expatriates. Of thisexpatriate population, over 50 per cent were South Asians.5Nearly 1.75 million Indian nationals resided in the UAE, which made it the single largest expatriatecommunity in the country. The other major groups included Pakistani (1.25 million) and Bangladeshis(600,000).6 Another one million were from other parts of Asia, including Iran, Philippines and Sri Lanka.The others were from other Arab states.3 Mohammad El Sadafy, “Peaceful Co-existence of Diverse Peoples One UAE’s Many Distinguishing Features,” Emirates24/7 News, www.emirates247.com/news/peaceful-co-existence-of-diverse-peoples-one-uae-s-many-distinguishing-features-2013-05-21-1.507329, accessed January 2, 2015.4 Ibid.5 Guide2Dubai.com, “Dubai Population and Nationalities,” www.guide2dubai.com/info/uae-population.asp, accessedDecember 8, 2014.6 Ibid.For the exclusive use of T. ALMASAEID, 2021.This document is authorized for use only by TURKI ALMASAEID in 2021.Page 6 9B15A052THE COMPETITORSOf Al Karama’s several restaurants in the vicinity of Raju Omlet, most were Indian. In the sense of itsproduct offering, Raju Omlet had no competitors; however, in the sense of serving to the Indian and Pakistaniexpatriate community in the UAE, the following could be considered as some of its major competitors.Bombay Chowpatty was an Indian restaurant serving vegetarian and non-vegetarian combo dishes, southIndian food, snacks, sweets, juices and milkshakes,7 as well as Chinese food items and pizzas. It had 15outlets in the UAE, and of these, 13 were in Dubai in prime locations (including one in Al Karama), onein Abu Dhabi and one in Sharjah. The owner had plans to take the brand to other Middle Easterncountries such as Bahrain, Qatar and Kuwait. It had dine-in, take-away and home-delivery facilities. Theaverage price for a meal for two persons was between AED50 and 70.8Chappan Bhog was another famous Indian restaurant in the vicinity. A pure vegetarian restaurant, it waschiefly known for its extensive variety of Indian sweets. It also served North and South Indian dishes,snacks and milkshakes. It started as a small Indian sweets and savouries shop in Abu Dhabi in 1996 andhad 12 outlets across the UAE by 2014.9 It had dine-in, take-away and home-delivery options. Theaverage cost of a meal for two came to around AED75.10Bikanervala was another prominent Indian restaurant, just opposite Raju Omlet. Its specialty was sweetsand savoury food. It served snacks, Indian curries, mini meals, South Indian dishes, pizzas, sandwiches,sweets and shakes.11 There were four outlets in Dubai and Sharjah.12 It offered dine-in, take-away andhome-delivery facilities. The average cost of a meal for two was around AED80.13Kulcha King specialized in a variety of Indian breads. Among the other items on the menu werevegetarian and non-vegetarian Indian dishes, combos, snacks, rolls and drinks. It had four outlets in theUAE and offered dine-in, take-away and home-delivery options.14 The average cost of a meal for twocame to around AED100.15Mumbai Restaurant specialized in popular Mumbai cuisine and offered an extensive range of fooditems, including North and South Indian dishes, sweets and drinks. It had two outlets, one in Dubai andthe other in Abu Dhabi.16 It specialized in outdoor catering and had dine-in, take-away and home-deliveryoptions.There were several other non-Indian restaurants, such as The Monk (Chinese), Betawi (Indonesian) andZamzam (Arabic) in Al Karama.7 Menu.au, www.menu.ae/Content.aspx?loc=10&rid=1353§ion=Details, accessed December 11, 2014.8 Zomato, https://www.zomato.com/dubai/bombay-chowpatty-al-karama, accessed December 11, 2014.9 Royal Orchid Group, www.theroyalorchidgroup.com/restaurants/chhappan-bhog.html, accessed November 17, 2014.10 Zomato, https://www.zomato.com/dubai/chhappan-bhog-al-karama, accessed December 2, 2014.11 Bikanervala, www.bikanervala.ae/contact-us.html, accessed December 2, 2014.12 Roundmenu.com, www.roundmenu.com/restaurant/bikanervala-karama-dubai/2317, accessed December 8, 2014.13 Zomato, https://www.zomato.com/dubai/bikanervala-al-karama, accessed December 9, 2014.14 Kulcha King, www.kulchaking.com/, accessed December 6, 2014.15 Zomato, https://www.zomato.com/dubai/kulcha-king-al-karama, accessed December 8, 2014.16 Mumbai Express Restaurant & Café, http://mumbaiexpress.org/, accessed December 8, 2014.For the exclusive use of T. ALMASAEID, 2021.This document is authorized for use only by TURKI ALMASAEID in 2021.Page 7 9B15A052THE WAY FORWARDRaju Omelet carved its niche by growing in terms of footfall, scale and financials. The business wasprofitable from the first year. The concept was unique, the people behind it were passionate, themarketing communication was apt and promises to customers were delivered. As a next step, Rajivconsidered different expansion and diversification options. He also planned to cater to a larger customerbase, including those of other cultures such as Arabs, Europeans and Americans. He wondered whether toaccentuate the sales by increasing the product range with the addition of chicken, meat and vegetablepreparations, increasing the number of outlets by maintaining its USP of egg preparations, or using acombination of these two strategies. He also wondered whether the non-Indian customer segment wouldenjoy the current preparations.Rajiv was facing a dilemma. The questions on his mind were: Would this product-range diversificationlead to the dilution of the Raju Omlet brand proposition? How could he retain his value proposition andstill diversify? What should the next steps be for Raju Omlet?For the exclusive use of T. ALMASAEID, 2021.This document is authorized for use only by TURKI ALMASAEID in 2021.Page 8 9B15A052EXHIBIT 1: SELECTED FINANCIALS FOR RAJU OMLET, 2013–2014(IN MILLIONS OF AED) 20132014Net Revenue680,0002,040,000Cost of Sales210,800591,600Operating Expenses272,000754,800Net Income197,200493,600 Note: Figures have been changed to maintain confidentiality.Source: Provided by the company.EXHIBIT 2: EXTERIOR OF RAJU OMLETSource: Provided by the company.EXHIBIT 3: INTERIOR OF RAJU OMLETSource: Provided by the company.For the exclusive use of T. ALMASAEID, 2021.This document is authorized for use only by TURKI ALMASAEID in 2021.Page 9 9B15A052EXHIBIT 4: RAJU OMLET MENU (IN AED)Source: Provided by the company.EXHIBIT 5: RAJU OMLET MOBILE APPSource: Provided by the company.For the exclusive use of T. ALMASAEID, 2021.This document is authorized for use only by TURKI ALMASAEID in 2021.
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